2010: A BRIC Odyssey

Ever since the meltdown of the Wall Street bubble, the world has faced an $800 billion question.

This is a number with some history.

For decades, the US was the consumer of last resort in the world economy. We had the biggest GDP, and consumption was a huge share of our economy, rising from 64% in the 1970s to 70% today.

Of course, the US was consuming beyond its means. What that meant was that in 2007, when neoliberalism's house of credit cards finally imploded, the world faced an $800 billion shortfall in net consumer demand. Here's the math: US GDP $14.2 trillion x 70% consumption share = $9.94 trillion of consumption. US retail sales went up by 8% a year during the early 2000s, adding a fresh $800 billion in annual global demand.

However, the US consumer is deeply indebted and will be retrenching for years to come. So who will pick up the slack?

Enter the BRICs.

The BRICs have been combating the global downturn in two ways: through increased government spending (classic Keynesianism) and by shifting their economic model from savings and exports to a balance between savings and internal consumption (a.k.a. Digital Age developmental statism).

Here are the numbers:

China is running a government deficit of 2% of GDP, or $109 billion. While the economy has continued to expand, China has been spending heavily on education, infrastructure and healthcare to forestall a downturn. Meanwhile, retail sales hit $1.84 trillion last year, and are projected to grow 15% this year (an extra $280 billion). Total stimulus: $109 billion + $280 billion = $389 billion

Russia's government deficit hit $74 billion or roughly 5% of GDP in 2009. In addition to tax revenues going down -- Russia was hard hit by the drop in the price of oil, though it has recovered quickly -- the government is spending heavily on domestic consumption. Pension payments are going up, and money is flowing into education and the high-tech sector. Retail sales were around $400 billion last year, and sales should increase 6% this year (an extra $24 billion). Total stimulus: $74 billion + $24 billion = $98 billion.

India's government deficit increased from 3% of GDP to 7% last year, a swing of $48 billion. The reason was not economic crisis -- growth remained respectable -- but the government's decision to make long-overdue investments in infrastructure, rural development and education. Retail sales were about $427 billion last year, and growth rates are poised to hit 8% (an extra $34 billion). Total stimulus: $48 billion + $34 billion = $81 billion.

Brazil's government swung from a 3% budgetary surplus to zero, a swing of about $45 billion. Brazil's slowdown was mild, but the Lula government launched a bunch of infrastructure projects to spur demand. Retail sales were around $368 billion and should grow 8% growth this year (an extra $22 billion). Total stimulus: $45 billion + $22 billion = $79 billion.

Hey presto, the BRICs alone are going to create $647 billion of fresh demand this year. This isn't quite enough to counterbalance the US slowdown, but gets us close. If the EU and Japan continue their stimulus, the world will have found its post-American economic engine, and things will dramatically improve.